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Why Congress Should Repeal Sugar Subsidy

The farm bill moving through Congress provides the Democrats an
excellent chance to challenge special interests and help average
families.

A ripe target for reform is the sugar program, which protects
sugar growers and inflates domestic sugar to twice the world price.
This racket costs U.S. families about $2 billion annually, hitting
them whenever they buy chocolates, breakfast cereal and the
like.

When the Republicans controlled Congress, they shied away from
sugar reform, yielding to the power of the sugar growers’ lobby.
The Democrats can show that they are different. By reforming sugar
policies, they could cut food costs for families and end unfair
benefits for a small group of wealthy sugar barons.

The sugar program is essentially a producer cartel run out of
Washington. The Agriculture Department operates a complex loan
program to guarantee sugar growers certain prices, which it
enforces with import barriers and domestic production controls.

The import barriers prevent cheaper foreign sugar from putting
downward pressure on domestic prices. Current rules restrict sugar
imports to about 15% of the American market. By contrast, when
rules were looser prior to the 1980s, sugar imports accounted for
half the U.S. market.

In the domestic market, the Agriculture Department decides what
total sugar production ought to be and allots 54% of production to
beet sugar and 46% to cane sugar. The department then allots each
sugar company a specific production quota. According to the
Government Accountability Office, 42% of sugar program benefits go
to just 1% of sugar growers.

Most sugar beet production is in Minnesota, Idaho, North Dakota,
Michigan and California. Most sugarcane production is in Florida
and Louisiana. Not surprisingly, policymakers from those states
usually block sugar reform. Nonetheless, policymakers from Illinois
and other such states, which have food companies damaged by high
sugar prices, are challenging the current program.

High sugar prices harm manufacturers of candies, chocolates and
breakfast cereal. A 2006 study by the Commerce Department found
that for each sugar industry job saved by the sugar program, nearly
three food manufacturing jobs are lost. The study found that:

Employment in food companies that use substantial amounts of
sugar is declining. Imports of food products that contain sugar are
growing because it is not competitive to make those products in the
U.S.

Numerous companies have relocated to Canada and Mexico, where
sugar prices are much lower.

Chicago, once the nation’s candy manufacturing capital, has
lost thousands of jobs. In 2004, candy maker Fannie May closed its
Chicago factory and Brach’s moved its Chicago candy production to
Mexico.

Michigan took a hit in 2002, when Kraft moved its 600-worker
LifeSavers factory to Canada in search of low-cost sugar.

Hershey Foods closed plants in Pennsylvania, Colorado and
California and relocated them to Canada as well.

The sugar program also causes environmental damage. Large areas
of the Florida Everglades have been converted to cane sugar
production as a result of sugar protection. That has caused damage
from the related land drainage, runoff of chemical fertilizers, and
the destruction of natural habitat.

With all the negative effects of the sugar program, why does it
survive? Because Congress often puts the interests of the favored
few ahead of the general public good. In this case, sugar growers
are well-organized and they protect the program by providing large
campaign support to presidents, governors and many members of
Congress.

But the sugar lobby is beatable. The Bush administration
proposed minor reform to sugar policies this year, and a bipartisan
group of more than 100 House members led by Jeff Flake, R-Ariz., is
demanding fundamental reform.

Also, under rules of the North American Free Trade Agreement,
the sugar trade with Mexico will be opened in 2008, which should
add to the pressure for reform.

In winning the House last year, Democrats portrayed themselves
as reformers willing to take on special interests for the benefit
of average families. Now they have a chance to prove it by
abolishing the sugar program.